SodaStream Reports Third Quarter Fiscal 2015 Results

Nov 04, 2015, 07:45 ET from SodaStream International Ltd.

AIRPORT CITY, Israel, Nov. 4, 2015 /PRNewswire/ -- SodaStream International Ltd. (NASDAQ: SODA), the leading manufacturer of home beverage carbonation systems, announced today its results for the three and nine month periods ended September 30, 2015.

For the third quarter ended September 30, 2015, on an adjusted basis*

  • Revenue was $110.0 million compared to $125.9 million in the third quarter 2014; Revenue on a constant currency basis was $126.0 million
  • Adjusted operating income was $5.4 million compared to $8.9 million in the third quarter 2014; Adjusted operating income on a constant currency basis was $10.5 million
  • Adjusted EBITDA was $9.7 million compared to $13.7 million in the third quarter 2014; Adjusted EBITDA on a constant currency basis was $14.8 million
  • Adjusted net income was $4.7 million compared to $9.5 million in the third quarter 2014
  • Adjusted diluted earnings per share were $0.22 compared to $0.45 in the third quarter 2014
  • CO2 refills reached an all-time quarterly record of 7.0 million

*Adjusted revenue, Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share are non-IFRS financial measures that eliminate the effect of restructuring costs, which include $2.5 million of pre-tax charges incurred as part of the Company's restructuring and growth plan announced on October 29, 2014. The charges were related to activities associated with discontinued products, which decreased inventory and fixed assets by $1.9 million and increased cost of revenue by $1.9 million. An additional expense of $0.6 million was associated with the transition to the new Lehavim plant in Southern Israel which increased cost of revenue. Adjusted EBITDA represents earnings before financial income, income tax, depreciation and amortization, and further eliminates the effect of restructuring costs. Reconciliations of the non-IFRS measures included in this press release to the IFRS results are included at the end of this press release.

"Our operating results were similar to the year ago period on a constant currency basis as the growth plan we announced a year ago continues to gain traction. Our recent performance included a number of highlights that underscore the strength of our brand and business model" said Daniel Birnbaum, Chief Executive Officer of SodaStream. "Third quarter CO2 refills increased 10% to an all-time record 7 million, a great indication that our global user base is increasing consumption. We believe usage rates will continue to grow as existing and new consumers embrace our repositioning as a healthy "water brand" provided by our enhanced better-for-you product portfolio, which we recently launched in the U.S. and other select countries. As we accelerate production in our new, state-of-the-art plant in Lehavim, and continue the launch of our new Waters line and strategic repositioning, we believe we are poised to start delivering improved financial results and greater shareholder value beginning in 2016."

 

Third Quarter 2015 Financial Reviews

(The financial review relates to the Non-IFRS Consolidated Statements of Operations. All USD values are in accordance with IFRS unless stated otherwise.)

Geographical Revenue Breakdown

Revenue

Three Months Ended

September 30, 2014

September 30, 2015

(Decrease)

(Decrease)

In Millions USD

%

Western Europe

$

74.6

$

68.5

$

(6.1)

(8)

%

The Americas

29.5

26.2

(3.3)

(11)

%

Asia-Pacific

13.3

9.0

(4.3)

(32)

%

Central & Eastern Europe, Middle East, Africa

8.5

6.3

(2.2)

(27)

%

Total

$

125.9

$

110.0

$

(15.9)

(13)

%

Product Segment Revenue Breakdown

Revenue

Three Months Ended

September 30, 2014

September 30, 2015

(decrease)

(decrease)

In millions USD

%

Sparkling Water Maker Starter Kits

$

41.5

$

34.2

$

(7.3)

(17)

%

Consumables

81.2

73.9

(7.3)

(9)

%

Other

3.2

1.9

(1.3)

(41)

%

Total

$

125.9

$

110.0

$

(15.9)

(13)

%

Product Segment Unit Breakdown

Three Months Ended

September 30, 2014

September 30, 2015

Increase

(decrease)

Increase

(decrease)

In thousands

%

Sparkling Water Maker Starter Kits

818

639

(179)

(22)

%

CO2 Refills

6,396

7,021

625

10

%

Flavors

7,607

6,726

(881)

(12)

%

 

The decrease in revenue year-over-year was mainly due to changes in foreign currency exchange rates which reduced revenue by $16.0 million. Since the same period a year ago, several foreign currencies have weakened versus the U.S. dollar, including the Euro by 17%, the Australian Dollar by 22% and the Swedish Krona by 18%.

Gross margin for the third quarter 2015 (before the impact of restructuring costs) was 48.4% compared to 51.2% for the same period in 2014. Third quarter 2015 gross margin was negatively impacted by changes in foreign currency exchange rates versus the same period last year, partially offset by higher share of CO2 refills in the product mix.

Sales and marketing expenses for the third quarter 2015 totaled $36.0 million, or 32.8% of revenue, compared to $41.6 million, or 33.1% for the comparable period last year. The decrease was primarily attributable to lower distribution costs driven by lower sales volume. Sales and marketing expenses also decreased versus the same period last year due to changes in foreign currency rates, mainly the weakening of the Euro and the Australian dollar.

General and administrative expenses for the third quarter 2015 were $11.8 million, or 10.7% of revenue, compared to $13.9 million, or 11.1% of revenue in the comparable period of last year. The decrease was mainly due to a decrease in share-based payment expenses.

Operating income (before the impact of restructuring costs) was $5.4 million, or 4.9% of revenue, compared to $8.9 million, or 7.1% of revenue, in the third quarter 2014. The decrease in operating income was driven primarily by negative impact on revenue from changes in foreign currency exchange rates, offset by lower operating expenses, mainly a reduction in sales and marketing expenses.

The net negative impact on operating income from changes in foreign currency exchange rates in comparison with the same period in 2014 was approximately $5.1 million.

Net financial income was $0.1 million compared to net financial income of $1.8 million in the same period in 2014. Financial income in the third quarter 2015 was mainly due to a reduction of liabilities in Israeli Shekels following its devaluation against the U.S. dollar.

Tax expense was $0.8 million with an effective tax rate of 26.0%, compared to $1.2 million with an effective tax rate of 11.5% in the third quarter 2014. The increase in the effective tax rate is due to the geographical allocation of profit before income tax.

Balance Sheet Review

Cash and cash equivalents at September 30, 2015 were $43.5 million compared to $46.9 million at December 31, 2014. The decrease is primarily attributable to the investment in the Company's new production facility, partially offset by cash generated from operations.

The Company had $47.6 million of bank debt at September 30, 2015 mainly for financing the investment in its new production facility, compared to $43.9 million of bank debt at December 31, 2014.

Working capital at September 30, 2015 decreased by 12.9% to $138.3 million compared to $158.8 million at December 31, 2014 largely due to the impact of the restructuring. Inventories at September 30, 2015 decreased by 12.4% to $121.2 million compared to $138.4 million at December 31, 2014.

Conference Call and Management Commentary

Detailed CFO commentary and a supplemental slide presentation have been annexed as Exhibits 99.2 and 99.3 to the Form 6-K furnished to the Securities and Exchange Commission and will be posted on the Company's website, http://sodastream.investorroom.com.

The Company has scheduled a conference call for 8:30 a.m. Eastern Standard Time (U.S. time) today (Wednesday, November 4, 2015) to review the Company's financial results. The conference call will be broadcast over the Internet as a "live" listen only Webcast. To listen, please go to: http://sodastream.investorroom.com. Listeners are urged to login approximately 20 minutes before the conference call is scheduled to begin in order to register, as well as download and install any necessary audio software. An archive of the Webcast will be available for 30 days after the call.

About SodaStream International

SodaStream is the world's leading manufacturer and distributor of Sparkling Water Makers, which enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds. By making ordinary water more exciting and fun to drink, SodaStream helps consumers drink more water. Sparkling Water Makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks. The products promote health and wellness, are environmentally friendly, cost effective, and are customizable and fun to use. Products are available at more than 70,000 retail stores across 45 countries, including approximately 13,000 retail stores in the United States. To learn more about how SodaStream makes water exciting and follow SodaStream on Facebook, Twitter, Pinterest, Instagram and YouTube, visit http://www.sodastream.com.  

Non-IFRS Financial Measures

The 6-K-IFRS measures, including Adjusted revenue, Adjusted net income, Adjusted EBITDA, and Adjusted diluted earnings per share ("Adjusted diluted EPS").

Adjusted EBITDA represents earnings before financial expense (income), income tax, depreciation and amortization, and further eliminates the effect of restructuring costs. Adjusted revenue, Adjusted net income and Adjusted diluted earnings per share eliminate the effect of restructuring costs.

The Company believes that the Adjusted revenue, Adjusted net income, Adjusted EBITDA and Adjusted diluted EPS, as described above, should be considered in evaluating the Company's operations. Adjusted revenue, Adjusted net income, Adjusted EBITDA and Adjusted diluted EPS exclude restructuring costs because most of this charge is a non-cash expense that does not reflect the performance of the Company's underlying business and operations. Adjusted EBITDA facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting financial expenses (income), net), tax positions (such as the impact on periods or companies of changes in effective tax rates) and the age and depreciation charges and amortization of fixed and intangible assets, respectively (affecting relative depreciation and amortization expense, respectively).

These measures should be considered in addition to results prepared in accordance with IFRS, but should not be considered a substitute for the IFRS results. The non-IFRS measures included in this press release have been reconciled to the IFRS results.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include information about possible or assumed future results of our business and financial condition, as well as the results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "potential," or the negative of these terms or other similar expressions: Such statements are based on management's current beliefs and expectations and involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: our ability to maintain or expand sales in our target markets, including the United States; our ability to maintain or continue to develop our presence in retail networks; our ability to develop and implement production and operating infrastructure to effectively support our growth; the success of our marketing campaigns and media spending in terms of increased sales or increased product and brand name awareness; our ability to maintain our customer base in markets where we have an established presence; the risks associated with our reliance on exclusive arrangements for the distribution of our beverage carbonation systems and consumables in each of the markets in which we use third-party distributors; our ability to compete effectively with other companies which currently offer, or may offer in the future, competing products; our ability to maintain margins due to decline in product selling price and/or rising costs; potential product liability claims if any component of our beverage carbonation systems is misused; our ability to protect our intellectual property rights; our being found to have a dominant position in certain markets which may place limits on our ability to operate; risks associated with our being a multinational corporation, including fluctuations in currency exchange rates; our potential exposure to greater than anticipated tax liabilities; our products being subject to extensive governmental regulation in the markets in which we operate; adverse conditions in the global economy which could negatively impact our customers' demand for our products; and other factors discussed under the heading "Risk Factors" in the Annual Report on the Form 20-F for the year ended December 31, 2014 and other documents filed with or furnished to the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Contact: Brendon Frey ICR Phone: + 1 203-682-8200 brendon.frey@icrinc.com

 

 

Consolidated Statements of Operations

In thousands (other than per share amounts)

For the nine months ended

For the three months ended

September 30,

September 30,

2014

2015

2014

2015

(Unaudited)

(Unaudited)

Revenues

$

385,248

$

300,193

$

125,905

$

110,015

Cost of revenues

187,668

155,455

61,428

59,255

Gross profit

197,580

144,738

64,477

50,760

Operating expenses

Sales and marketing

134,723

103,610

41,636

36,031

General and administrative

40,358

34,869

13,931

11,772

Total operating expenses

175,081

138,479

55,567

47,803

Operating income

22,499

6,259

8,910

2,957

Interest expense (income), net

552

64

219

(62)

Other financial income, net

(1,210)

(5,212)

(2,002)

(10)

Total financial income, net

(658)

(5,148)

(1,783)

(72)

Income before income taxes

23,157

11,407

10,693

3,029

Income tax expense

2,672

2,158

1,229

787

Net income for the period

$

20,485

$

9,249

$

9,464

$

2,242

Net income per share

Basic

$

0.98

$

0.44

$

0.45

$

0.11

Diluted

$

0.96

$

0.44

$

0.45

$

0.11

Weighted average number of shares

Basic

20,956

21,030

21,000

21,041

Diluted

21,243

21,111

21,193

21,118

 

 

Consolidated Balance Sheets as of

December 31,

September 30,

2014

2015

(Audited)

(Unaudited)

(In thousands)

Assets

Cash and cash equivalents

$

46,880

$

43,480

Inventories

138,392

121,231

Trade receivables

94,217

70,928

Other receivables

34,789

29,493

Derivative financial instruments

1,035

1,013

Total current assets

315,313

266,145

Property, plant and equipment

124,817

152,080

Intangible assets

44,389

43,169

Deferred tax assets

2,506

3,809

Other receivables

273

437

Total non-current assets

171,985

199,495

Total assets

487,298

465,640

Liabilities

Loans and borrowings

9,239

27,374

Derivative financial instruments

491

-

Trade payables

67,011

46,919

Income tax payable

11,740

10,044

Provisions

2,469

2,622

Other current liabilities

27,882

24,779

Total current liabilities

118,832

111,738

Loans and borrowings

34,645

20,241

Employee benefits

2,174

2,051

Other non-current liabilities

122

157

Deferred tax liabilities

750

700

Total non-current liabilities

37,691

23,149

Total liabilities

156,523

134,887

Shareholders' equity

Share capital

3,400

3,405

Share premium

198,918

202,830

Translation reserve

(14,908)

(28,096)

Retained earnings

143,365

152,614

Total shareholders' equity

330,775

330,753

Total liabilities and shareholders' equity

$

487,298

$

465,640

 

 

Consolidated Statements of Cash Flows

For the nine months ended

For the three months ended

September 30,

September 30,

2014

2015

2014

2015

(Unaudited)

(Unaudited)

Cash flows from operating  activities

Net income for the period

$

20,485

$

9,249

$

9,464

$

2,242

Adjustments:

Amortization of intangible assets

2,042

2,765

781

907

Change in fair value of  derivative financial instruments

(1,324)

(3,040)

(1,588)

800

Exchange rate differences on Short-term loans and borrowing

-

(1,386)

-

(46)

Exchange rate differences on long-term loans and borrowing

(1,030)

(2,870)

(1,030)

365

Depreciation of property, plant  and equipment

10,085

9,822

3,994

3,352

Restructuring costs

-

6,536

-

2,003

Share based payment

6,732

3765

2,195

1,334

Interest expense (income), net

552

64

219

(62)

Income tax expense

2,672

2,158

1,229

787

40,214

27,063

15,264

11,682

Decrease (increase) in inventories

(15,604)

10,117

(11,659)

5,061

Decrease (increase) trade and other receivables

23,425

17,373

9,572

(1,850)

Increase (decrease) in trade payables and other liabilities

(17,933)

(21,078)

10,345

1,560

Increase (decrease) in employee benefits

(70)

(41)

(89)

74

Increase (decrease) in provisions

378

188

(79)

(88)

30,410

33,622

23,354

16,439

Interest paid

(549)

(182)

(220)

(17)

Income tax received

715

549

5

283

Income tax paid

(4,361)

(5,508)

(422)

(2,303)

Net cash from operating activities

26,215

28,481

22,717

14,402

Cash flows from investing  activities

Interest received

42

118

15

79

Proceeds from investment grants

-

2,252

-

-

Proceeds from (payment for) derivative financial  instruments, net

(527)

2,571

721

828

Acquisition of property, plant  and equipment

(43,710)

(40,793)

(15,499)

(12,208)

Acquisition of intangible assets

(4,054)

(2,825)

(1,508)

(974)

Net cash used in investing  activities

(48,249)

(38,677)

(16,271)

(12,275)

Cash flows from financing  activities

Proceeds from exercise of employee share options

820

153

79

-

Receipts of long-term loans and borrowings

30,210

-

30,210

-

Repayments of long-term loans and borrowings

-

(14,026)

-

(1,674)

Change in short-term debt

(8,830)

22,013

(31,997)

9,673

Net cash from (used in) financing activities

22,200

8,140

(1,708)

7,999

Net increase (decrease) in cash and cash equivalents

166

(2,056)

4,738

10,126

Cash and cash equivalents at the beginning of the period

40,885

46,880

36,244

33,418

Effect of exchange rates  fluctuations on cash and cash equivalents

(1,150)

(1,344)

(1,081)

(64)

Cash and cash equivalents  at the end of the period

$

39,901

$

43,480

$

39,901

$

43,480

 

 

 

Information about Adjusted revenue in reportable segments

Western Europe

The Americas

Asia-Pacific

Central & Eastern Europe, Middle East, Africa

Total

(In thousands)

Nine months ended:

September 30, 2014 (Unaudited)

$

214,805

105,141

37,396

27,906

$

385,248

September 30, 2015 (Unaudited)

188,238

72,098

27,040

15,637

$

303,013

Three months ended:

September 30, 2014 (Unaudited)

$

74,589

29,504

13,265

8,547

$

125,905

September 30, 2015 (Unaudited)

$

68,505

26,234

8,997

6,279

$

110,015

 

 

        

The following tables present the Company's Adjusted revenue, by

product type for the periods presented, as well as such revenue

by product type as a percentage of total revenue:

Nine months ended

Three months ended

September 30,

September 30,

2014

2015

2014

2015

(Unaudited)

(Unaudited)

Revenue

(in thousands)

Sparkling Water Maker starter kits (including exchange cylinders)

$

119,534

$

91,499

$

41,464

$

34,234

Consumables

254,835

205,133

81,212

73,882

Other

10,879

6,381

3,229

1,899

Total

$

385,248

$

303,013

$

125,905

$

110,015

 

Nine months ended

Three months ended

September 30,

September 30,

2014

2015

2014

2015

(Unaudited)

(Unaudited)

(Unaudited)

As a percentage of revenue

Sparkling Water Maker starter kits (including exchange cylinders)

31.0

%

30.2

%

32.9

%

31.1

%

Consumables

66.1

%

67.7

%

64.5

%

67.2

%

Other

2.9

%

2.1

%

2.6

%

1.7

%

Total

100.0

%

100.0

%

100.0

%

100.0

%

 

 

 

The following table provides a reconciliation of Non-IFRS to IFRS

financial data for the three months ended September 30, 2015:

Non-IFRS

Restructuring

IFRS

In Thousands USD

Revenue

$

110,015

$

$

110,015

Cost of revenue

56,800

2,455

59,255

Gross profit

53,215

(2,455)

50,760

Operating income

5,412

(2,455)

2,957

Net income for the period

$

4,697

$

(2,455)

$

2,242

Net income per share

Basic and diluted (in USD)

0.22

(0.11)

0.11

 

 

EBITDA

Nine months ended

Three months ended

September 30,

September 30,

2014

2015

2014

2015

(Unaudited)

(In thousands)

Reconciliation of Net Income to EBITDA

Net income

$

20,485

$

9,249

$

9,464

$

2,242

Financial income, net (*)

(658)

(5,148)

(1,783)

(72)

Income tax expense

2,672

2,158

1,229

787

Depreciation and amortization

12,127

12,587

4,775

4,259

EBITDA

$

34,626

$

18,846

$

13,685

$

7,216

Restructuring

-

7,347

-

2,455

Adjusted EBITDA

34,626

26,193

13,685

9,671

 

(*) Starting in Q1 2015, the Company presents EBITDA excluding total financial expense (income), net, as opposed to 2014 in which EBITDA was presented excluding only interest expense. Three months ended September 30, 2014 and nine months ended September 30, 2014 EBITDA were also adjusted to exclude total financial expense.

 

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SOURCE SodaStream International Ltd.



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